WCT (9679)

Hit our entry price at 3.17 but retrace to 3.12 near trading session end.  Perhaps is due to Bersih 2.0?  Anyway, ADX cross 20 from below indicating new trend is forming.

Research done by CIMB

Target Price: RM4.15
WCT is well positioned for the construction boom and is a main beneficiary of the Economic Transformation Programme (ETP). The construction firm still has an edge in open tenders as it remains one of the efficient contractors and boasts a strong track record. Local project flows this year are likely to be as good as last year for WCT. It is targeting RM2bil worth of new jobs this year, backed by the ETP and 10th Malaysia Plan. WCT has also pre-qualified for the RM10bil- RM11bil mass rapid transit elevated works. Despite the Middle East tensions, we remain optimistic about the group's prospects in the Gulf region, especially in Qatar and Abu Dhabi. Factors that could trigger a re-rating (on its Outperform rating) include projects wins and ebbing Middle East concerns.
Risk: The risk entailed would be any delays to the implementation of the ETP. CIMB Investment Bank Bhd head of research Terence Wong

Maybank research
(July 7, RM3.15)
Maintain buy at RM3.12 with target price of RM3.75: WCT’s 2011 job win target remains at RM2 billion riding on a sizeable RM10 billion tender book. This will provide the lift to its RM3.4 billion outstanding order book. We retain our forecast for a 31% growth in 2011 net profit supported by strong property sales, completion of the 1Medini earthworks and good progress at the Qatar government building works. Our target price pegs the stock to sum-of-parts (15 times 2012 price-earnings ratio plus 20 sen value enhancement for the KLIA2 retail concession).

Our optimism is based on an existing RM10 billion tender book of which 65% is in the Middle East and the rest in Malaysia. The former includes potential works in Abu Dhabi and Saudi Arabia. Domestic jobs include a government building job and the LRT Package B in which WCT has participated in the tender. The award for one of two lines (Kelana Jaya) is expected soon while the other (Ampang) at end-3Q or early-4Q.

WCT has also participated in the contractors pre-qualification for the Klang Valley MRT (Sg Buloh-Kajang line) elevated structure works, which closed on April 13. Despite more than 70 contractors having participated, we are positive on WCT being pre-qualified. The elevated structure, spanning an estimated 41.5km, offers a revised works value of RM12 billion to RM13 billion, we understand. The call for tender is expected in July, and work awards towards end-2011.

Locked-in sales for the quarter were at least RM20 million as at mid-June, against RM100 million in 1Q11. The relatively slow sales are believed to be seasonal, with target launches for 2011 staying at RM400 million and target sales at RM300 million. 1Medini condominium (gross development value raised to RM700 million from RM600 million) is still on track for its maiden launch in September. Unbilled sales of RM264 million (73% at Bandar Parklands, 27% in Sabah) should provide for stronger property earnings ahead. The terms are still being finalised with financing issues being sorted out.

WCT has a 70% stake in the concession, together with Malaysia Airports (30%). We derive a preliminary 9% concession internal rate of return based on RM520 million project cost and RM10 per sq ft rental income per month. Our preliminary estimate is a 20 sen per share value enhancement for WCT. — Maybank IB Research, July 7